Food and fuel prices push India's retail inflation in October

15 November, 2017, 02:05 | Author: Lora Ball
  • Retail Inflation touches 7-month high of 3.58% in October

The retail inflation rose up to seven-month high to 3.58 in October due to the high prices of food items, especially vegetables, eggs, milk and their products, and tobacco products and housing sector.

The Consumer Prices Index 12-month rate was unchanged from the level in September, the Office for National Statistics said in a statement.

However, inflation in various household goods and services declined, implying the goods and services tax (GST) did not have much impact. It was lower by 22.51 per cent in September.

According to the data, the food inflation for October was recorded 1.90 per cent higher than September's 1.25 per cent and August's 1.52 per cent.

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"There is, however, a low likelihood of a rate cut by the RBI in the immediate term", said Aditi Nayar, an economist at ICRA, an Indian arm of the rating agency Moody's, adding that inflationary expectations could remain high in the second half of the fiscal year that ends in March. The average price of the Indian basket of crude oil rose to $56.06 a barrel in October from $54.52 in September. The GST Council's recent decision to cut the rates on around 200 items is likely to further dampen the rate of price rise of these items.

Kate Smith, head of pensions at Aegon, warned people are facing a "triple whammy" of squeezes in their purse: high inflation, little sign of wage growth and rising interest rates. Inflation in rural areas was 3.4%, while in urban centres it stood at 3.8%.

Commenting on the Reserve Bank of India's (RBI) expected reaction to the inflation numbers released before its monetary policy review meet on December 6, Jaikishan J. Parmar, Research Analyst at Angel Broking, said: "Firstly, the CPI inflation is still well within the RBI comfort zone of 4 per cent".

The government data released today showed that inflation in food articles more than doubled to 4.30 percent in October.

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